Can the cloud revive manufacturing?

BERKELEY, Calif – Cloud computing could help usher in the next wave of technological innovation and, with it, provide a new engine for economic growth, say the authors of a forthcoming study on the emerging cloud computing ecosystem.

John Zysman, coauthor of the cloud study and co-director of the Berkeley Roundtable on the International Economy here, argues that “cloud-enhanced services” promise to take up much of the economic slack caused by the steady shift over the last several decades from manufacturing to services. Despite the loss of those U.S. manufacturing jobs, “direct linkages” persist between high value-added services and manufacturing, Zysman said in an interview.

In a 1987 book, Zysman and coauthor Stephen Cohen argued that manufacturing remains fundamental to economic growth and that service sector jobs only complement rather than replace critical manufacturing employment. “Manufacturing matters mightily to the wealth and power of the United States,” Zysman and Cohen declared in Manufacturing Matters: The Myth of the Post-Industrial Economy. “You can’t control what you can’t produce.”

In the interview, Zysman posited that “ICT-enabled services are produced” and that "the transformation of the services sector" would be achieved by “embedding ICT-enabled services in manufactured products to create distinctive value.” For example, a manufacturer of construction cranes could embed intelligence into its products in order to compete with Chinese crane makers in markets like providing port management services.

Zysman and his coauthors update the competitive landscape in the new survey, stressing the enormous economic potential of cloud computing, particularly for network providers seeking to add value to the services they deliver via the cloud. Adding value in the production process or in the brave new world of delivering “cloud-enhanced services” is seen as a major competitive advantage for Western economies as they compete with Asian manufacturing powerhouses like China.

“We contend that cloud computing is historically unique by simultaneously being an innovation ecosystem, production platform and global marketplace,” concludes the study, compiled by UC-Berkeley professor Zysman, Kenji Kushida of Stanford University and Jonathan Murray, a former Microsoft executive now with Warner Music Group. “Manufacturing is a piece of production,” Zysman said in the interview. “Google services are produced.”

(A possible caveat in the authors’ enthusiasm for cloud computing may be tempered by the fact that their study was funded in part by networking giant Cisco Systems and Microsoft, two companies with enormous stakes in the success of cloud computing.)

Government agencies, for their part, are seeking to leverage the economic benefits of an offshoot from cloud networks called “big data." The National Science Foundation (NSF) announced a $200 million research initiative on March 29 to study the economic impact of big data, an extension of what has been dubbed the Internet of Things.

“Data, in my view, is a transformative new currency for science, engineering, education, commerce and government,” Farnam Jahanian, head of NSF’s computer and information science and engineering directorate,” told the New York Times.

I am weary of the fact that Microsoft and Cisco funded the study. Still, it's encouraging that someone has some realistic ideas for reviving manufacturing in the U.S. A lot of people are interested in this issue, but very few, it seems to me, have proposed realistic solutions.